What is the primary measurement basis for passive investments under ASPE 3856?

Under ASPE 3856, the primary measurement basis for passive investments is indeed either fair value or amortized cost, depending on the nature of the investment. For passive investments that are held for the purpose of receiving dividend income or capital appreciation—typical characteristics of long-term investments—the fair value method is often appropriate. This approach allows entities to measure these investments based on current market conditions, providing a more accurate reflection of their economic value at each reporting date.

Conversely, if the investments are held to maturity or are not actively traded, they may be measured at amortized cost, which is based on the original cost adjusted for principal repayments and amortization of any discounts or premiums. This provides a stable, predictable measure of value over time as it reflects the cost of the asset without frequent fluctuations that come with market volatility.

This dual approach allows companies to more accurately report their financial positions based on the nature of their investment strategies, supporting users of the financial statements in making informed decisions.